There are some nice pictures of the plant it grows from over here, as well as links to recipes.
To the left is a super-macro photograph, but here's what the same thing, about half a teaspoon, looks like to the non-macro lens:
The seeds are about half the size of peppercorns, and have about the same hardness. Like dried peppercorns, you can bite them open with an effort, but you wouldn't want to add them whole to any dish. The taste is mild and slightly peppery, and sometimes they are ground whole and added to foods. Mostly, though, it's the red coating alone that is used.
To make annatto oil, all you need to do is add 1 teaspoon of annatto seeds to 1 tablespoon of oil (any kind; I used canola), heat to simmering, and let simmer for two minutes or so until the oil has turned a deep orange-red.
Strain the oil:
The taste of the oil does not change, but it is now infused with a powerful dye that you can use to give a cheerful warm colour to sauces, rice, or your rubber spatulas. I didn't know what to expect, so I made a simple rice dish by briefly frying cooked rice in the annatto oil for a few minutes:
It was pretty and festive. That shiny lacquered look is not a photographic illusion. I'm eager to try it in more things, like a veganized version of the Mayan chicken with spicy orange paste from over here.